Grupo Modelo SAB de CV (GMODELOC), the Mexican brewer of Corona beer, and Molson Coors Brewing Co. (TAP) have been exploring a possible joint bid for Australia’s Foster’s Group Ltd. (FGL), said five people with knowledge of the situation.
The brewers are working with banks including Bank of America Corp. and Deutsche Bank AG on lining up financing for a potential purchase, said the people, who declined to be identified because the matter is private. Shares of Melbourne- based Foster’s surged 3.5 percent today, giving it a market value of about A$8.6 billion ($9.2 billion).
A takeover of Foster’s may face challenges if Anheuser- Busch InBev NV, which owns 50 percent of Modelo, seeks to block a purchase, the people said. A bid looks less likely now than it did a few weeks ago because of concerns about the structure of a deal, they said. The companies could also pursue Foster’s on their own or with other partners, the people said.
“They do need a partner to finance a deal,” Philip Gorham, an analyst with Morningstar Inc. (MORN) in Chicago, said of Molson Coors in a telephone interview. “Australia is a mature market that Molson understands.”
Adding Foster’s may help Modelo stay independent after the brewer unsuccessfully tried to deny board seats to AB InBev directors. InBev, the world’s largest brewer, got a non- controlling stake in Modelo and nine of 19 board seats in its $52 billion acquisition of Anheuser-Busch in 2008. Modelo has a market value of about 230 billion pesos ($20 billion).
Consensus on Deal
An acquisition by Mexico City-based Modelo would require the consensus of the brewer’s shareholders, including AB InBev.
Molson Coors might be more likely to team up with its existing U.S. partner, SABMiller Plc (SAB), to bid for Foster’s, rather than get tied up with competitor AB InBev, Gorham said.
“To be pulled in two directions like that could lead to a loss of focus on their own strategic direction,” he said.
Modelo is being advised by Bank of America and Greenhill & Co., and Molson Coors is working with Deutsche Bank, the people said. Modelo uses Denver-based Molson Coors, rather than AB InBev, to distribute its brands in the U.K.
Foster’s said last year it hired Gresham Advisory Partners as a financial adviser. Goldman Sachs Group Inc. (GS) is also an adviser, and the brewer is open to a takeover, the people said.
Foster’s rose 15 cents to A$4.43 at the 4:10 p.m. market close in Sydney, the largest gain since Jan. 24. The stock earlier rose as much as 7.9 percent.
Foster’s noted the report of a “potential bid” in a filing and said it’s not aware of any unannounced information after being queried by the Australian Securities Exchange on the share price rise.
Modelo declined 0.4 percent to 71.28 pesos in Mexico City trading yesterday, and Molson Coors declined 3.7 percent to $44.36.
Colin Wheeler, a spokesman for Molson Coors, and Jennifer Shelley, a spokeswoman for Modelo, declined to comment, as did Andrew Butcher, a spokesman for Foster’s, and AB InBev’s Marianne Amssoms. Spokesmen for Deutsche Bank, Bank of America, Goldman Sachs and Greenhill also declined to comment.
The talks between Modelo and Coors show how a growing number of consumer-product companies, squeezed by rising commodity prices and limited consumer demand, are looking to snap up rivals with business in other markets. ConAgra Foods Inc. (CAG) made an unsolicited $4.9 billion takeover offer for cereal maker Ralcorp Holdings Inc. (RAH) last month.
Other brewers have also expressed interest in Foster’s, which has a 50 percent share of the Australian beer market. SABMiller Plc, the world’s second-largest brewer by volume, was studying a bid for the beer assets, a person familiar with the situation said in September. A spokesman for SABMiller declined to comment.
Foster’s distributes Modelo’s Corona brand in Australia. The Australian brewer last month spun off its Treasury Wine Estates Ltd. division, the world’s second-largest winemaker, to focus on beer. Treasury Wine was valued at A$2.2 billion as a public company after Foster’s rejected an unsolicited offer of as much as A$2.7 billion for the business in September.
Foster’s said in a May 2010 statement that creating separate wine and beer companies would enable both to be valued more appropriately by the market over time.
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